Electric energy is generated for public consumption by utility companies. Each utility company has a service area in which it enjoys near-monopoly status. The utility company is obligated to supply the electric energy needs of individual customers within the service area. Of course, the demand for electricity can vary according to a number of factors. In the long run, the demand for electricity is a function of the population and industries within the service area. In the short run, electrical demand varies according to many factors. Extreme weather, in particular, can significantly strain the generation capacity of the utility company.
An electric energy grid exists which connects each utility's generating facilities to those of adjacent utilities. Each circle represents an individual utility company. Each line represents high-voltage lines which form the grid between the various utilities.
Electric energy is traded between utility companies and other market participants to meet shortfalls in capacity during unit outages, to achieve cost savings, or to increase revenues. "Bulk transactions" refers to the wholesale buying and selling of electrical energy. Typically, the parties involved in these trades are traditional electric utility companies. These companies wish to meet their obligations to provide reliable service to their customers in the most economically feasible manner. Often it is possible for a utility to purchase electricity from a neighboring utility more economically than it could produce it for itself At other times, the power generator can sell excess generation at a price higher than its cost of generation.
To determine which trades are economic, utilities produce sophisticated forecasts of load (required generation) so that they can schedule their generators to run efficiently. The system dispatcher then determines if demand is likely to be over or under projections during various times of the day. The dispatcher is also interested in the associated cost with each level of generation. Even though the load forecasts are sophisticated, actual conditions usually deviate from them. This may be due to a number of circumstances, such as having generating units go off-line unexpectedly, differences between forecast and actual weather conditions, or changes in the price of available fuel to run the generators. All of these events affect the costs to produce electricity. Because of changes in these forecasts, the dispatcher telephones neighboring utility companies to determine prices and quantities of energy available for upcoming hours. These calls occur many times a day, sometimes hourly. At the same time, dispatchers for other utilities are also making phone calls. If the dispatcher finds what he considers to be a good deal, a trade is consummated. The result is that deals are often struck before the phone surveys are complete. It is rare for a dispatcher to call beyond his direct neighbors, and almost never farther out than two companies. This means that the opportunity for more economic transactions may have been overlooked simply because the dispatcher did not know about them.
A need exists for a system which creates substantial efficiency gains by automating this trading process over the current method of using the phone. This method of trading energy should allow utilities to simultaneously view real-time market prices and energy availabilities and to quickly consummate the best opportunities. The system should consider available transmission capacity, and calculate and schedule the least cost path for the energy. It should also report the transactions, invoice the participating parties, and facilitate rapid collection and disbursement of funds. Lastly, the system should allow for anonymous trading required of a true market.